Why CCAR Matters for Investors: NRB Report Explained

The Core Capital Adequacy Ratio (CCAR) is one of the most critical indicators in the Nepal Rastra Bank’s financial supervision framework, and it deserves special attention from investors. Unlike the broader Capital Adequacy Ratio (CAR), which includes both core and supplementary capital (such as subordinated debt or revaluation reserves), CCAR strictly measures a bank’s tier-1 equity strength—the permanent capital base made up of paid-up equity, reserves, and retained earnings. This makes CCAR a more conservative and reliable measure of a bank’s true financial resilience, as it represents the capital that can immediately absorb losses during periods of stress.

According to NRB’s provisional data for Asadh end 2082 (mid-July 2025), the sector-wide CCAR stands at 10.03%, just above the regulatory threshold of 8.5–10%. While this indicates that commercial banks in Nepal collectively have sufficient equity backing their assets, the margin of safety is thinner compared to the overall CAR of 12.78%. The difference suggests that a notable portion of capital comes from supplementary sources, which are not as robust as core equity when absorbing shocks. For investors, this means that while banks may appear healthy on paper with double-digit CARs, it is CCAR that reveals whether their true equity cushion is strong enough to withstand non-performing loan (NPL) growth or economic downturns.

Some banks, such as Standard Chartered (CCAR 15.80%) and Nepal Investment Mega Bank (11.09%), show high CCAR, indicating solid core equity strength and lower solvency risk. On the other hand, several banks including Rastriya Banijya Bank (9.46%) and Himalayan Bank (8.31%) hover closer to the minimum, reflecting limited flexibility to absorb potential losses. This divergence is crucial for investors who must weigh stability against growth: high-CCAR banks may offer safer long-term bets, while low-CCAR banks, though riskier, may seek aggressive expansion to generate returns.

The importance of CCAR also extends to market psychology. In times of financial stress, depositors and shareholders alike place greater trust in banks with stronger equity bases. This can impact stock prices, dividend stability, and even customer loyalty. Thus, CCAR not only reflects regulatory compliance but also serves as a confidence indicator for the banking sector.